Indonesia Data Center Market Outlook to 2030

Indonesia Data Center Market Overview

• The Indonesia data center market is valued at USD 1.71 billion, driven by the country's increasing digitalization, growing internet penetration, and expanding cloud computing services. Major infrastructural projects like the Palapa Ring and the government-backed Digital Indonesia Roadmap have played a role in advancing the digital infrastructure, contributing to the construction and expansion of data centers. Demand for data center services has surged due to the rapid adoption of cloud computing, big data, and AI-driven applications.

• Greater Jakarta remains the dominant region for data centers in Indonesia. This dominance stems from its superior infrastructure, strategic geographical location, and concentration of technology-driven companies. The availability of land, power, and network infrastructure in Greater Jakarta facilitates the establishment of Tier III and Tier IV data centers, making it the epicenter for data center growth in the country.
• The Indonesian government has laid out a comprehensive digital transformation roadmap aiming to accelerate data center development. As part of this initiative, by 2024, the government will allocate over $2 billion towards developing digital infrastructure, including data centers. The roadmap supports the growth of the tech ecosystem, including data storage, cloud services, and digital payment systems, fostering a favorable environment for data center expansion.

Indonesia Data Center Market Segmentation

By Type: The market is segmented by type into Colocation, Hyperscale, and Edge Data Centers. Colocation services dominate the market due to the growing number of enterprises seeking cost-effective solutions for their IT infrastructure. Colocation facilities offer flexibility and scalability, attracting both local and international companies to outsource their data storage and processing needs. Hyperscale data centers are also gaining traction as cloud services and large-scale IT operations expand across the region.

By End-User: The market is also segmented by end-user into BFSI, IT & Telecom, Government, E-Commerce, and Media & Entertainment. The BFSI sector holds the largest share, as financial institutions increasingly require secure and scalable data storage solutions for digital banking services. The IT & Telecom sector follows closely due to the rapid expansion of cloud computing and AI technologies, making Indonesia a growing hub for data processing.

Indonesia Data Center Market Competitive Landscape

The market is dominated by a mix of global and local players. The presence of multinational companies like Amazon Web Services and Alibaba Cloud has bolstered competition, driving innovation in infrastructure development.

Indonesia Data Center Market Analysis

Market Growth Drivers

• Rising Demand for Cloud Services and Data Storage: Indonesia is witnessing an increase in demand for cloud services and data storage due to the rapid expansion of its digital economy. As more businesses adopt digital platforms, the demand for data centers to support cloud services has surged. By 2024, over 200 million internet users are expected to generate enormous data flows, requiring expanded data storage capacities across the country.
• Increased Foreign Direct Investment (FDI) in Data Center Infrastructure: Indonesia's data center market is benefiting from increased foreign investments due to favorable regulations encouraging global players to enter the market. With the Indonesian government actively encouraging FDI, the country has attracted billions in investments from major players. In 2024 alone, it is estimated that foreign investments in the data center sector will exceed $2 billion.
• Regulatory Push for Data Localization: Indonesias government mandates local data storage regulations, requiring critical data to be stored within the country. This regulatory push, formalized under Government Regulation No. 71/2019, has accelerated the demand for localized data centers. In 2024, the strict enforcement of this regulation is expected to prompt businesses, including global tech firms, to build or lease local data storage facilities, driving market growth.

Market Challenges

• High Energy Costs and Sustainability Issues: Data centers are highly energy-intensive, and in Indonesia, electricity prices are among the highest in the region. In 2024, the average commercial electricity cost in Indonesia is expected to reach around IDR 1,500 per kWh, posing a significant operational challenge for data center operators.
• Limited Connectivity in Remote Areas: While major cities like Jakarta and Surabaya have well-developed digital infrastructure, other regions still suffer from limited connectivity. By 2024, more than 40% of Indonesia's population in rural areas will continue to face internet access issues, constraining the potential growth of data centers beyond urban regions.

Indonesia Data Center Market Future Outlook

The Indonesia data center industry is expected to experience robust growth over the next five years, driven by factors such as increased cloud adoption, the deployment of 5G networks, and ongoing digital transformation initiatives.

Future Market Opportunities

• Expansion of Edge Data Centers to Support 5G Rollout: Indonesia is set to experience rapid expansion in edge data centers to complement the ongoing 5G rollout, expected to be completed by 2026. By 2027, it is estimated that over 75 edge data centers will be operating across Indonesia, reducing latency and enhancing connectivity for users in both urban and rural areas. This trend will support industries such as gaming, financial services, and e-commerce, which rely heavily on low-latency services.
• Increased Focus on Green Data Centers: Over the next five years, sustainability will be a focus in Indonesia's data center market. By 2029, it is projected that 50% of new data center projects will be powered by renewable energy sources, supported by the government's initiatives to promote green energy. This shift is expected to reduce the carbon footprint of the industry by over 10 million tons annually by the end of the decade.